[Code of Federal Regulations]
[Title 24, Volume 4]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR883.306]

[Page 104-105]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
  CHAPTER VIII--OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL
 
PART 883_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM_STATE HOUSING 
AGENCIES--Table of Contents
 
              Subpart C_Definitions and Other Requirements
 
Sec. 883.306  Limitation on distributions.

    (a) Non-profit owners are not entitled to distributions of project 
funds.
    (b) For the life of the Contract, proj ect funds may only be 
distributed to profit-motivated owners at the end of each fiscal year of 
project operation following the effective date of the Contract and after 
all project expenses have been paid, or funds have been set aside for 
payment, and all reserve requirements have been met. The first year's 
distribution may not be made until the HFA certification of project 
costs, (See Sec. 883.411), where applicable, has been submitted to HUD. 
The HFA must certify that distributions will not exceed the following 
maximum returns:
    (1) For projects for elderly families, the first year's distribution 
will be limited to 6 percent on equity. The Assistant Secretary may 
provide for increases in subsequent years' distributions on an annual or 
other basis so that the permitted return reflects a 6 percent return on 
the value, in subsequent years, as determined in accordance with HUD 
guidelines, of the approved initial equity. Any such adjustments will be 
made in accordance with a Notice in the Federal Register. The HFA may 
approve a lesser increase or no increase in subsequent years' 
distributions.
    (2) For projects for non-elderly families the first year's 
distribution will be limited to 10 percent on equity. The Assistant 
Secretary may provide for increases in subsequent years' distributions 
on an annual or other basis so that the permitted return reflects a 10 
percent return on the value, in subsequent years, as determined in 
accordance with HUD guidelines, of the approved initial equity. Any such 
adjustments will be made in accordance with a Notice in the Federal 
Register. The HFA may approve a lesser increase or no increase in 
subsequent years' distributions.

[[Page 105]]

    (c) For the purpose of determining the allowable distribution, an 
owner's equity investment in a project is deemed to be 10 percent of the 
replacement cost of the part of the proj ect attributable to dwelling 
use accepted by the HFA at cost certification (See Sec. 883.411), or as 
specified in the Proposal where cost certification is not required, 
unless the owner justifies a higher equity contribution through cost 
certification documentation accepted by the HFA.
    (d) Any short-fall in return may be made up from surplus project 
funds in future years.
    (e) If the HFA determines at any time that surplus project funds are 
more than the amount needed for proj ect operations, reserve 
requirements and permitted distributions, the HFA may require the excess 
to be placed in a separate account to be used to reduce housing 
assistance payments or for other project purposes. Upon termination of 
the Contract, any excess project funds must be remitted to HUD.
    (f) Owners of small projects or partially assisted projects are 
exempt from the limitation on distributions contained in paragraphs (b) 
through (d) of this section.
    (g) HUD may permit increased distributions of surplus, in excess of 
the amounts otherwise permitted, to profit-motivated owners who 
participate in a HUD-approved initiative or program to preserve below-
market housing stock. The increased distributions will be limited to a 
maximum amount based on market rents and calculated according to HUD 
instructions. Funds that the owner is authorized to retain under section 
236(g)(2) of the National Housing Act are not considered distributions 
to the owner.
    (h) Any State or local law or regulation that restricts 
distributions to an amount lower than permitted by this section or 
permitted by the Commissioner under this paragraph (h) is preempted as 
provided by section 524(f) of the Multifamily Assisted Housing Reform 
and Affordability Act of 1997.

[45 FR 6889, Jan. 30, 1980, as amended at 65 FR 61075, Oct. 13, 2000; 65 
FR 68891, Nov. 15, 2000]